About Savings Plus

As an HR pro, you have the unique perspective of processing and receiving Savings Plus benefits. Therefore, it's especially important for you to understand how Savings Plus works.

Savings Plus is the name of the 401(k) Plan and 457(b) Plan which began in 1974 as a long-term retirement savings program for most State of California employees.

The 401(k) Plan and the 457(b) Plan are named for the sections of the Internal Revenue Code (IRC) that regulate them. Internally, Savings Plus often refers to the 401(k) Plan and 457(b) Plan as "main plan" accounts to distinguish them from
ARP and
PST mandatory accounts. All permanent State employees,
Rehired Annuitants, and ARP participants are eligible to contribute to a main plan account.

Savings Plus contributions are through automatic payroll deductions that go into investments the employee selects from the Savings Plus portfolio. Employees may choose to contribute to a 401(k) Plan, a 457(b) Plan, or both. As of January 2013, employees may also choose to contribute pre-tax or Roth (after tax). All contributions are transmitted to Savings Plus through automatic payroll withdrawals.

Savings Plus is an important resource since the California Public Employee's Retirement System (CalPERS) pension and Social Security may not provide sufficient income to maintain an employee's standard of living during retirement. Savings Plus offers a wide range of investments to choose from and the ability to tailor a retirement plan to meet each employee's individual needs and goals for the future.

Not an Ordinary Savings Account

Employees may stop and start their Savings Plus contributions without penalty as often as needed. However, to derive the maximum benefit, the money contributed to Savings Plus should remain invested until retirement. For this reason, employees must consider carefully how much income they can comfortably contribute to Savings Plus without placing an undue financial burden on their monthly living expenses. Federal regulations prohibit Savings Plus from releasing retirement savings unless the employee qualifies for a distributable event as outlined by federal guidelines.

Generally, employees shouldn't participate in either plan if:

All income is needed to meet current financial obligations; or

Money isn't available for short-term needs such as vacation, holidays, etc.

Legal Authority

CalHR Law 19993. Chapter 4, Deferred Compensation

CalHR Law 1999.5 Chapter 9, Tax-Deferred Savings Plans

Eligibility

All permanent State of California employees may enroll in Savings Plus, including employees in the Alternate Retirement Program (ARP), and rehired annuitants.

Employees indicate the contribution amount they wish and designate beneficiary(ies). Savings Plus sends an information kit and a deferral confirmation to the employee approximately ten business days after processing the enrollment request.

Rehired Annuitants

State and CSU employees who separate and return to work as "Rehired Annuitants" may contribute to Savings Plus. (The term "rehired" annuitant, is also known as "retired" annuitant among State employees.)

As a working retiree, you understand firsthand the importance of financial security during retirement. It is not too late to act. As a Rehired Annuitant, you qualify for this benefit if you separated at least 180 days prior to enrolling in Savings Plus and you're paid through the State of California payroll system.

Cost

The employee pays a $1.50 monthly administrative fee for each plan account. Employees may enroll in both (401(k), and 457(b)), but that also means they'll pay administrative fees for both. For that reason, most employees maximize contributions to one plan before they open up a second plan account.

Fees collected from participant accounts provide funding to administer Savings Plus. Monthly administrative fees are assessed for each account at the end of the third week of each month.

Annual Contribution Limits

The minimum contribution (deferral) amount is $50 per month. Federal regulations specify annual limits on how much employees may contribute. It is each employee's responsibility not to exceed these limits. Over-deferring or exceeding the annual cap can have adverse tax consequences. For more information or for current contribution limits see the
Plan Comparison Chart available online at
SavingsPlusNow.com.

Review Program Materials

Savings Plus mails an information kit to the employee shortly after the employee enrolls. Encourage your employee to review the information contained in this kit. This will help the employee select an investment profile that best fits their individual risk tolerance and time horizon.

Choosing an Investment Strategy

Savings Plus invests the employee's initial contributions in the Target Date Fund that corresponds to their date of birth. Employees should review the investment choices (described in the Investment Guide) and take action to choose an investment profile that meets their needs. The Investment Guide provides information about asset allocation, which is the key to a diversified portfolio. We stress asset allocation as the single most prudent way to maximize return potential while reducing the risk of losing money. A well diversified portfolio is the most critical factor in determining how your portfolio performs in the long run.

Employees may access their existing account or open a new account online at SavingsPlusNow.com.

Complete Beneficiary Designation

The employee has the ability to update beneficiary information anytime online. If no Beneficiary Designation is on record at the time of death, Savings Plus issues the employee's death benefits in the following order:

spouse or registered domestic partner, or if none;

children (including adopted children), or if none;

parents, or if none; brothers and sisters, or if none;

estate (probated), or if not probated; trust, or if none;

stepchildren, or if none; grandchildren, or if none;

nieces and nephews, or if none;

great-grandchildren, or if none;

cousins, or if none;

in accordance with state law for intestate estates.

Savings Plus lists beneficiaries on Quarterly Statements and at SavingsPlusNow.com. If no beneficiary is on file, the quarterly statement will have a message "no beneficiary on file."

Address and Name Changes

Actively Contributing

Participants who currently contribute to Savings Plus should change their address and name through their HR Office not through Savings Plus. They should contact their HR Office and complete an Employee Action Request (EAR) form. Savings Plus receives monthly address updates from payroll offices.

Not Contributing

Participants who are retired, separated, or no longer contribute to Savings Plus may update their information online, by phone, fax, or mail. See Savings Plus Contact Information for details.

If mailing a name change request, provide a copy of marriage license, dissolution or court document authorizing the name change.

Traditional Catch-Up - 457(b) Plan Only

457(b) Plan Traditional Catch-Up allows employees to increase contributions, up to double the 457(b) Plan annual limit. Employees who did not contribute the annual maximum in previous tax years may be eligible to participate in Catch-Up. Eligibility only applies to the time employed with their current employer (e.g. the State of California, not the individual department.) Employees may use the Catch-Up provision only once, for up to 3 consecutive calendar years if:

The employee was eligible to contribute to the Savings Plus 457(b) plan in prior years and

Is a permanent employee with the State of California, the California State University system, Senate Rules Committee, Assembly Rules Committee, Legislative Analyst's Office.

Employees may participate in Catch-Up no sooner than three years prior to their normal retirement age. Normal retirement age represents the earliest age of typical retirement for the industry in which the employee works. Savings Plus defines normal retirement age as a range between age 50 to 70 ½. An employee working in safety classification is an example of the industry where normal retirement age could be designated as age 50. It is up to the employee to decide their normal retirement age. While in Catch-Up, if the employee retires or separates from employment they can use their lump sum separation pay to fund their Catch-Up contributions. To qualify, employees' must attach a copy of their 457(b) Catch-Up approval letter to their Transfer Lump Sum Separation Pay Form.

Note:

The law does not allow participation in Catch-Up and 457(b) Age-Based Deferral at the same time.

Participating in 457(b) Catch-Up and the 401(k) Age-Based Deferral is permitted.

Age-Based Deferral

The Aged-Based Deferral allows employees age 50 or older to contribute an additional amount to both plans for tax year. There's no form to complete. The Age-Based Deferral option provides some flexibility and may be started/stopped/started again, or continued each year until retirement. For more information or for current contribution limits see the
Plan Comparison Chart available online at
SavingsPlusNow.com.

Loans

Savings Plus offers the following two types of loans:

General Purpose Loan

Primary Residential Loan

Employees may have one outstanding loan from each Plan at any given time. However, the amount the employee borrows from one Plan will affect the maximum amount they may borrow from the other Plan.

Savings Plus calculates loan interest rates at the prime rate + 1%. The prime rate used to determine the interest rate is published in the Wall Street Journal on the second business day of the month. Interest rates are subject to change on a monthly basis and are determined based on the current interest rate at the time the application is approved.

A one-time non-refundable fee of $50 is deducted from each loan amount to cover the costs of processing and handling the transaction. Loan repayments are automatically deducted from the savings or checking account you designate with after-tax dollars and invested according to your current investment allocation. Employees may use the Savings Plus Web site or the VRS to "Model and Request a Loan."

401(k) Hardship Withdrawal

Employees may request a 401(k) Hardship Withdrawal for an immediate and heavy financial need when no other funds (including Savings Plus loans) are available.

Eligible hardships are as follows:

(1) Post-secondary education tuition for the employee or a dependent (current school year only);

(2) purchase of their primary home;

(3) to seek or pay medical expenses;

(4) to pay expenses due to a disability or the death of a family member,

(5) payments to prevent eviction from principal residence

(6) funeral expenses of a dependent, and

(7) expenses for the repair of damage to the participant's principal residence (must qualify as a casualty deduction under IRS Section 165)

The IRS limits the hardship withdrawal to the amount of money the employee contributed or rolled over into their 401(k) without interest or other gains their money has earned. The IRS may require employees who receive a 401(k) payment before age 59½ to pay an additional 10% federal tax and 2½% CA state tax. Approval of a Hardship Withdrawal prohibits contributions to either plan for 6 months.

Employees may request a 401(k) Hardship Withdrawal through their secure online account access, or contact Savings Plus for assistance.

457(b) Unforeseeable Emergency

Employees are permitted an early distribution ONLY for an unforeseeable emergency they can demonstrate is beyond their control. Examples may include:

(1) catastrophic illness;

(2) disabling injury;

(3) death of a dependent family member;

(4) property damage from a natural disaster.

The employee must provide documentation to show they aren't able to pay for these expenses through use of a loan (including a Savings Plus loan), insurance, or other income assets.

Approval isn't automatic. If approved, the employee may receive up to the full amount of their account balance and there are no tax penalties. Approval prohibits contributions to either plan for 6 months.

Permissible Service Credit Purchase

Employees may use 401(k), 457(b), and Part-Time, Seasonal, and Temporary (PST) Retirement Program assets to purchase permissible service credits from defined benefit plans such as the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS). This option is available to active employees at any time, regardless of age, with no tax or penalty.

Employees must request a cost estimate from CalPERS, CalSTRS, or other defined benefit plan, before initiating the purchase process with Savings Plus. Employees should attach a copy of their service credit quote, specify the exact dollar amount they want transferred, sign, date and mail the original form to Savings Plus. If the employee has questions about their eligibility and purchase of prior service credit, they should contact CalPERS at 888-225-7377, CalSTRS at 800-228-5453, or other defined benefit plan.

Lump Sum Separation Pay

Employees may transfer all or a portion of their unused accumulated leave credit to Savings Plus. The amount transferred cannot exceed the annual limit for the tax year(s) involved. If the employee's separation date is between November 1, and December 31, the employee may transfer up to the limit for the current tax year and for the following tax year. To take advantage of this option, employees must submit a written request to their HR Office at least 30 calendar days prior to their final date of employment.

The Savings Plus Lump Sum Separation Pay Form is available at
SavingsPlusNow.com under the forms and publications tab. HR professionals should be prepared to assist their employees in determining actual contribution amounts, leave balances, the value of their lump sum separation pay, etc.

Investment Options

Currently, Savings Plus offers a competitive investment lineup and a self-directed brokerage option for experienced investors. The 401(k) Plan and the 457(b) Plan both have the same investment choices. Employees may review the Investment Guide (included in the information kit) for more information.

Access your account online at SavingsPlusNow.com for a current listing of investments, fact sheets/ prospectuses, and helpful information. Savings Plus also provides certified Retirement Specialists for assistance. These professionals offer unbiased assistance in retirement planning, developing an asset allocation model, and the benefits of pre-tax investing. Employees may also want to seek the advice of a qualified investment advisor.

Self Directed Brokerage Account (SDBA)

Savings Plus offers a self-directed brokerage account (SDBA) called the Schwab Personal Choice Retirement Account (PCRA) through Charles Schwab, member FINRA, SIPC for experienced investors who may want to direct investments to a wider variety of options other than those available in Savings Plus' core lineup.

Through a PCRA, employees can buy or sell a wide range of mutual funds, individual stocks, bonds, and a variety of other investments. The HFS SDBA offers a broader variety of investment options, however, employees will pay the broker any fees, commissions, and expenses related to transactions they perform.

Interested employees may obtain SDBA information from the Savings Plus Web site
SavingsPlusNow.com.

Training

Employees and HR professionals alike may attend a Savings Plus educational workshop to learn more about various aspects of this State employee benefit.